Customers Don’t Care About Loyalty Programs As Much As Brands Think They Do

Customers Don’t Care About Loyalty Programs As Much As Brands Think They Do

Finishing lunch with a friend several weeks ago, I pulled out my wallet and foraged for a credit card. Struck by my billfold’s girth, he quipped, “What’s in your wallet?”

I plunked it down on the table and had to confess that it had the look of a leather-clad, extra-large cheeseburger. After staring at the thing for a few seconds, I joined my friend’s wonder. “I have no idea,” I answered. “Let’s find out.”

Leaving aside the expired roadside assistance cards, driver’s license and a few dollars, piled up was a smorgasbord of loyalty cards: three groceries, two coffee shops, two pharmacy chains, a sandwich shop, the local ice cream store, the downstairs shoeshine place, three airlines, two car rental companies, two hotel groups, an office supply store and Amtrak.

Why do we carry all these things? I have pruned the assortment numerous times, and the inevitable result is finding myself in possession of every card except the one I need. Simply put, it’s easier to haul my giant billfold than it is to manage my loyalty card collection.

Loyalty programs have taken over our wallets, our key rings and now our smartphones, but how loyal do all these loyalty cards make consumers? The bulk of my loyalty has nothing to do with loyalty cards. I shop most often at the closest grocery store. I go to the ice cream shop with the best ice cream. I take the flights that best fit my schedule and have the best price, and I take a similar approach with hotels.

I do tend to use services for which I have a loyalty card, but only because I hoarded cards from the places where I like to shop. There are a lot more than two hotel groups, but I only have two hotel loyalty cards. Those two groups (for now) meet most of my needs. If I spent a lot of time away from home and neither was a good option, I’d simply acquire one more loyalty card, if my wallet could take it. In this sense, my loyalty card collection was as much a reflection of past behavior as it was a testament to brand preference.

What’s interesting is that the ‘What’s in your wallet?’ line from the credit card commercial is basically trying to get us to care about something that we inherently don’t really care about.

And yet, many of these companies represented in my wallet likely count me among their loyal customers. They probably see that I have their card and buy their brands, so they figure I’m loyal. But they likely don’t realize that changes in my behavior may have nothing to do with them. For example, I’m traveling more this year than last year. It’s possible both hotel companies I patronize think that I’m being more loyal because I’m giving them more business.

As an experiment, I asked my friend to name a couple of brands that he actively chooses and where he has a real choice. He felt a loyalty for Netflix because they make movie rental staggeringly easy. He’s loyal to Tide detergent (because it’s what his mother used) and Dunkin’ Donuts because he loves the coffee. In essence, these are examples of loyalty without loyalty programs.

Such is the paradox of corporate loyalty programs: many of us belong to a dozen or more, in many cases without attachment. We collect points, perks and discounts by purchasing nothing more, in many cases, than we would have purchased, even in the absence of points or discounts. Corporations spend billions annually under the dubious notion that it is less expensive to retain an existing customer than to acquire a new one. But as my wallet reveals, four or five competitors in the same industry could all claim that they are “retaining me.” You know what? I don’t care what’s in my wallet, because I think most of the businesses are pretty much the same.

Emerging “mobile wallet” platforms arguably will only exacerbate the problem for brands.

There are now a number of apps for all these loyalty programs. This solves my fat-wallet problem, but the paradox still holds true –while consumers increasingly experience loyalty programs as undifferentiated commodities, brands look to them as sources of retention and distinction.

Digging deeper, it is as if many companies have surrendered the cause of innovation and instead placed a wishful confidence in a loyalty program: “My product may be the same as the other guy’s, but I’ll win because of my killer loyalty program.”

But what if companies used their loyalty programs to make the product or service better for me? What if, instead of compensating me for what is usually a similar (and not very good) experience, they made the experience better? Now, that would really be a loyalty program that I’d care about, and that’s a card that would probably move out of the undifferentiated mass in the middle of my wallet to a special place in my heart.

Related Insights

A whopping 46% of consumers tell us they are more likely to try new brands than they were five years ago; a clear signal to a trend we should expect to intensify. Yet we see few signs that adjustments have been made to marketing initiatives or innovation pipelines to match these numbers.